BILL NUMBER: SB 113	CHAPTERED  07/06/99

	CHAPTER   58
	FILED WITH SECRETARY OF STATE   JULY 6, 1999
	APPROVED BY GOVERNOR   JULY 6, 1999
	PASSED THE ASSEMBLY   JUNE 24, 1999
	PASSED THE SENATE   APRIL 15, 1999
	AMENDED IN SENATE   MARCH 16, 1999
	AMENDED IN SENATE   MARCH 8, 1999

INTRODUCED BY   Senator Kelley

                        DECEMBER 17, 1998

   An act to amend Sections 17053.47 and 23622.8 of the Revenue and
Taxation Code, relating to taxation.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 113, Kelley.  Manufacturing Enhancement Areas:  tax credits.
   The Personal Income Tax Law and the Bank and Corporation Tax Law
provide a credit against the taxes imposed by those laws to a
qualified taxpayer for hiring a qualified disadvantaged individual
for employment in a Manufacturing Enhancement Area.
   This bill would make specified clarifying changes to those
provisions.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 17053.47 of the Revenue and Taxation Code is
amended to read:
   17053.47.  (a) For each taxable year beginning on or after January
1, 1998, there shall be allowed a credit against the "net tax" (as
defined in Section 17039) to a qualified taxpayer for hiring a
qualified disadvantaged individual during the taxable year for
employment in the Manufacturing Enhancement Area.  The credit shall
be equal to the sum of each of the following:
   (1) Fifty percent of the qualified wages in the first year of
employment.
   (2) Forty percent of the qualified wages in the second year of
employment.
   (3) Thirty percent of the qualified wages in the third year of
employment.
   (4) Twenty percent of the qualified wages in the fourth year of
employment.
   (5) Ten percent of the qualified wages in the fifth year of
employment.
   (b) For purposes of this section:
   (1) "Qualified wages" means:
   (A) That portion of wages paid or incurred by the qualified
taxpayer during the taxable year to qualified disadvantaged
individuals that does not exceed 150 percent of the minimum wage.
   (B) The total amount of qualified wages which may be taken into
account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per taxable
year.
   (C) Wages received during the 60-month period beginning with the
first day the qualified disadvantaged individual commences employment
with the qualified taxpayer.  Reemployment in connection with any
increase, including a regularly occurring seasonal increase, in the
trade or business operations of the taxpayer does not constitute
commencement of employment for purposes of this section.
   (D) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the Manufacturing Enhancement Area
expiration date.  However, wages paid or incurred with respect to
qualified employees who are employed by the qualified taxpayer within
the Manufacturing Enhancement Area within the 60-month period prior
to the Manufacturing Enhancement Area expiration date shall continue
to qualify for the credit under this section after the Manufacturing
Enhancement Area expiration date, in accordance with all provisions
of this section applied as if the Manufacturing Enhancement Area
designation were still in existence and binding.
   (2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
   (3) "Manufacturing Enhancement Area" means an area designated
pursuant to Section 7073.8 of the Government Code according to the
procedures of Chapter 12.8 (commencing with Section 7070) of Division
7 of Title 1 of the Government Code.
   (4) "Manufacturing Enhancement Area expiration date" means the
date the Manufacturing Enhancement Area designation expires, is no
longer binding, or becomes inoperative.
   (5) "Qualified disadvantaged individual" means an individual who
satisfies all of the following requirements:
   (A) (i) At least 90 percent of whose services for the qualified
taxpayer during the taxable year are directly related to the conduct
of the qualified taxpayer's trade or business located in a
Manufacturing Enhancement Area.
   (ii) Who performs at least 50 percent of his or her services for
the qualified taxpayer during the taxable year in the Manufacturing
Enhancement Area.
   (B) Who is hired by the qualified taxpayer after the designation
of the area as a Manufacturing Enhancement Area in which the
individual's services were primarily performed.
   (C) Who is any of the following immediately preceding the
individual's commencement of employment with the qualified taxpayer:

   (i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor.
   (ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985, or its successor, as provided
pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2
of Part 3 of Division 9 of the Welfare and Institutions Code.
   (iii) Any individual who has been certified eligible by the
Employment Development Department under the federal Targeted Jobs Tax
Credit Program, or its successor, whether or not this program is in
effect.
   (6) "Qualified taxpayer" means any taxpayer engaged in a trade or
business within a Manufacturing Enhancement Area designated pursuant
to Section 7073.8 of the Government Code and who meets both of the
following requirements:
   (A) Is engaged in those lines of business described in Codes 2011
to 3999, inclusive, of the Standard Industrial Classification (SIC)
Manual published by the United States Office of Management and
Budget, 1987 edition.
   (B) At least 50 percent of the qualified taxpayer's work force
hired after the designation of the Manufacturing Enhancement Area is
composed of individuals who, at the time of hire, are residents of
the county in which the Manufacturing Enhancement Area is located.
   (C) Of this percentage of local hires, at least 30 percent shall
be qualified disadvantaged individuals.
   (7) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
   (c) (1) For purposes of this section, all of the following apply:

   (A) All employees of trades or businesses that are under common
control shall be treated as employed by a single qualified taxpayer.

   (B) The credit (if any) allowable by this section with respect to
each trade or business shall be determined by reference to its
proportionate share of the expense of the qualified wages giving rise
to the credit and shall be allocated in that manner.
   (C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
   (2) If a qualified taxpayer acquires the major portion of a trade
or business of another employer (hereinafter in this paragraph
referred to as the "predecessor") or the major portion of a separate
unit of a trade or business of a predecessor, then, for purposes of
applying this section (other than subdivision (d)) for any calendar
year ending after that acquisition, the employment relationship
between a qualified disadvantaged individual and a qualified taxpayer
shall not be treated as terminated if the qualified disadvantaged
individual continues to be employed in that trade or business.
   (d) (1) (A) If the employment, other than seasonal employment, of
any qualified disadvantaged individual, with respect to whom
qualified wages are taken into account under subdivision (b) is
terminated by the qualified taxpayer at any time during the first 270
days of that employment (whether or not consecutive) or before the
close of the 270th calendar day after the day in which that qualified
disadvantaged individual completes 90 days of employment with the
qualified taxpayer, the tax imposed by this part for the taxable year
in which that employment is terminated shall be increased by an
amount equal to the credit allowed under subdivision (a) for that
taxable year and all prior taxable years attributable to qualified
wages paid or incurred with respect to that qualified disadvantaged
individual.
   (B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a) is not continued by the qualified
taxpayer for a period of 270 days of employment during the 60-month
period beginning with the day the qualified disadvantaged individual
commences seasonal employment with the qualified taxpayer, the tax
imposed by this part, for the taxable year that includes the 60th
month following the month in which the qualified disadvantaged
individual commences seasonal employment with the qualified taxpayer,
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that taxable year and all prior taxable years
attributable to qualified wages paid or incurred with respect to that
qualified disadvantaged individual.
   (2) (A) Subparagraph (A) of paragraph (1) does not apply to any of
the following:
   (i) A termination of employment of a qualified disadvantaged
individual who voluntarily leaves the employment of the qualified
taxpayer.
   (ii) A termination of employment of a qualified disadvantaged
individual who, before the close of the period referred to in
subparagraph (A) of paragraph (1), becomes disabled to perform the
services of that employment, unless that disability is removed before
the close of that period and the taxpayer fails to offer
reemployment to that individual.
   (iii) A termination of employment of a qualified disadvantaged
individual, if it is determined that the termination was due to the
misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of
Title 22 of the California Code of Regulations) of that individual.
   (iv) A termination of employment of a qualified disadvantaged
individual due to a substantial reduction in the trade or business
operations of the qualified taxpayer.
   (v) A termination of employment of a qualified disadvantaged
individual, if that individual is replaced by other qualified
disadvantaged individuals so as to create a net increase in both the
number of employees and the hours of employment.
   (B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
   (i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
   (ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period referred
to in subparagraph (B) of paragraph (1), becomes disabled and unable
to perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified disadvantaged individual.
   (iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that qualified disadvantaged
individual.
   (iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
   (v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that qualified disadvantaged individual
is replaced by other qualified disadvantaged individuals so as to
create a net increase in both the number of seasonal employees and
the hours of seasonal employment.
   (C) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified disadvantaged
individual shall not be treated as terminated by reason of a mere
change in the form of conducting the trade or business of the
qualified taxpayer, if the qualified disadvantaged individual
continues to be employed in that trade or business and the qualified
taxpayer retains a substantial interest in that trade or business.
   (3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
   (e) In the case of an estate or trust, both of the following
apply:
   (1) The qualified wages for any taxable year shall be apportioned
between the estate or trust and the beneficiaries on the basis of the
income of the estate or trust allocable to each.
   (2) Any beneficiary to whom any qualified wages have been
apportioned under paragraph (1) shall be treated (for purposes of
this part) as the employer with respect to those wages.
   (f) The credit shall be reduced by the credit allowed under
Section 17053.7.  The credit shall also be reduced by the federal
credit allowed under Section 51 of the Internal Revenue Code.
   In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the qualified taxpayer upon
which the credit is based shall be reduced by the amount of the
credit, prior to any reduction required by subdivision (g) or (h).
   (g) In the case where the credit otherwise allowed under this
section exceeds the "net tax" for the taxable year, that portion of
the credit that exceeds the "net tax" may be carried over and added
to the credit, if any, in succeeding years, until the credit is
exhausted.  The credit shall be applied first to the earliest taxable
years possible.
   (h) (1) The amount of credit otherwise allowed under this section,
including prior year credit carryovers, that may reduce the "net tax"
for the taxable year shall not exceed the amount of tax that would
be imposed on the qualified taxpayer's business income attributed to
a Manufacturing Enhancement Area determined as if that attributed
income represented all of the net income of the qualified taxpayer
subject to tax under this part.
   (2) Attributable income shall be that portion of the taxpayer's
California source business income that is apportioned to the
Manufacturing Enhancement Area.  For that purpose, the taxpayer's
business income that is attributable to sources in this state first
shall be determined in accordance with Chapter 17 (commencing with
Section 25101) of Part 11.  That business income shall be further
apportioned to the Manufacturing Enhancement Area in accordance with
Article 2 (commencing with Section 25120) of Chapter 17 of Part 11,
modified for purposes of this section in accordance with paragraph
(3).
   (3) Income shall be apportioned to a Manufacturing Enhancement
Area by multiplying the total California business income of the
taxpayer by a fraction, the numerator of which is the property factor
plus the payroll factor, and the denominator of which is two.  For
purposes of this paragraph:
   (A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the Manufacturing Enhancement
Area during the taxable year, and the denominator of which is the
average value of all the taxpayer's real and tangible personal
property owned or rented and used in this state during the taxable
year.
   (B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the Manufacturing
Enhancement Area during the taxable year for compensation, and the
denominator of which is the total compensation paid by the taxpayer
in this state during the taxable year.
   (4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding taxable
years, as if it were an amount exceeding the "net tax" for the
taxable year, as provided in subdivision (g).
   (i) If the taxpayer is allowed a credit pursuant to this section
for qualified wages paid or incurred, only one credit shall be
allowed to the taxpayer under this part with respect to any wage
consisting in whole or in part of those qualified wages.
  SEC. 2.  Section 23622.8 of the Revenue and Taxation Code is
amended to read:
   23622.8.  (a) For each income year beginning on or after January
1, 1998, there shall be allowed a credit against the "tax" (as
defined in Section 23036) to a qualified taxpayer for hiring a
qualified disadvantaged individual during the income year for
employment in the Manufacturing Enhancement Area.  The credit shall
be equal to the sum of each of the following:
   (1) Fifty percent of the qualified wages in the first year of
employment.
   (2) Forty percent of the qualified wages in the second year of
employment.
   (3) Thirty percent of the qualified wages in the third year of
employment.
   (4) Twenty percent of the qualified wages in the fourth year of
employment.
   (5) Ten percent of the qualified wages in the fifth year of
employment.
   (b) For purposes of this section:
   (1) "Qualified wages" means:
   (A) That portion of wages paid or incurred by the qualified
taxpayer during the income year to qualified disadvantaged
individuals that does not exceed 150 percent of the minimum wage.
   (B) The total amount of qualified wages which may be taken into
account for purposes of claiming the credit allowed under this
section shall not exceed two million dollars ($2,000,000) per income
year.
   (C) Wages received during the 60-month period beginning with the
first day the qualified disadvantaged individual commences employment
with the qualified taxpayer.  Reemployment in connection with any
increase, including a regularly occurring seasonal increase, in the
trade or business operations of the qualified taxpayer does not
constitute commencement of employment for purposes of this section.
   (D) Qualified wages do not include any wages paid or incurred by
the qualified taxpayer on or after the Manufacturing Enhancement Area
expiration date.  However, wages paid or incurred with respect to
qualified employees who are employed by the qualified taxpayer within
the Manufacturing Enhancement Area within the 60-month period prior
to the Manufacturing Enhancement Area expiration date shall continue
to qualify for the credit under this section after the Manufacturing
Enhancement Area expiration date, in accordance with all provisions
of this section applied as if the Manufacturing Enhancement Area
designation were still in existence and binding.
   (2) "Minimum wage" means the wage established by the Industrial
Welfare Commission as provided for in Chapter 1 (commencing with
Section 1171) of Part 4 of Division 2 of the Labor Code.
   (3) "Manufacturing Enhancement Area" means an area designated
pursuant to Section 7073.8 of the Government Code according to the
procedures of Chapter 12.8 (commencing with Section 7070) of Division
7 of Title 1 of the Government Code.
   (4) "Manufacturing Enhancement Area expiration date" means the
date the Manufacturing Enhancement Area designation expires, is no
longer binding, or becomes inoperative.
   (5) "Qualified disadvantaged individual" means an individual who
satisfies all of the following requirements:
   (A) (i) At least 90 percent of whose services for the qualified
taxpayer during the income year are directly related to the conduct
of the qualified taxpayer's trade or business located in a
Manufacturing Enhancement Area.
   (ii) Who performs at least 50 percent of his or her services for
the qualified taxpayer during the income year in the Manufacturing
Enhancement Area.
   (B) Who is hired by the qualified taxpayer after the designation
of the area as a Manufacturing Enhancement Area in which the
individual's services were primarily performed.
   (C) Who is any of the following immediately preceding the
individual's commencement of employment with the qualified taxpayer:

   (i) An individual who has been determined eligible for services
under the federal Job Training Partnership Act (29 U.S.C. Sec. 1501
et seq.), or its successor.
   (ii) Any voluntary or mandatory registrant under the Greater
Avenues for Independence Act of 1985, or its successor, as provided
pursuant to Article 3.2 (commencing with Section 11320) of Chapter 2
of Part 3 of Division 9 of the Welfare and Institutions Code.
   (iii) Any individual who has been certified eligible by the
Employment Development Department under the federal Targeted Jobs Tax
Credit Program, or its successor, whether or not this program is in
effect.
   (6) "Qualified taxpayer" means any corporation engaged in a trade
or business within a Manufacturing Enhancement Area designated
pursuant to Section 7073.8 of the Government Code and that meets all
of the following requirements:
   (A) Is engaged in those lines of business described in Codes 2011
to 3999, inclusive, of the Standard Industrial Classification (SIC)
Manual published by the United States Office of Management and
Budget, 1987 edition.
   (B) At least 50 percent of the qualified taxpayer's work force
hired after the designation of the Manufacturing Enhancement Area is
composed of individuals who, at the time of hire, are residents of
the county in which the Manufacturing Enhancement Area is located.
   (C) Of this percentage of local hires, at least 30 percent shall
be qualified disadvantaged individuals.
   (7) "Seasonal employment" means employment by a qualified taxpayer
that has regular and predictable substantial reductions in trade or
business operations.
   (c) (1) For purposes of this section, all of the following apply:

   (A) All employees of all corporations that are members of the same
controlled group of corporations shall be treated as employed by a
single qualified taxpayer.
   (B) The credit (if any) allowable by this section with respect to
each member shall be determined by reference to its proportionate
share of the expenses of the qualified wages giving rise to the
credit and shall be allocated in that manner.
   (C) Principles that apply in the case of controlled groups of
corporations, as specified in subdivision (d) of Section 23622.7,
shall apply with respect to determining employment.
   (2) If a qualified taxpayer acquires the major portion of a trade
or business of another employer (hereinafter in this paragraph
referred to as the "predecessor") or the major portion of a separate
unit of a trade or business of a predecessor, then, for purposes of
applying this section (other than subdivision (d)) for any calendar
year ending after that acquisition, the employment relationship
between a qualified disadvantaged individual and a qualified taxpayer
shall not be treated as terminated if the qualified disadvantaged
individual continues to be employed in that trade or business.
   (d) (1) (A) If the employment, other than seasonal employment, of
any qualified disadvantaged individual, with respect to whom
qualified wages are taken into account under subdivision (b) is
terminated by the qualified taxpayer at any time during the first 270
days of that employment (whether or not consecutive) or before the
close of the 270th calendar day after the day in which that qualified
disadvantaged individual completes 90 days of employment with the
qualified taxpayer, the tax imposed by this part for the income year
in which that employment is terminated shall be increased by an
amount equal to the credit allowed under subdivision (a) for that
income year and all prior income years attributable to qualified
wages paid or incurred with respect to that qualified disadvantaged
individual.
   (B) If the seasonal employment of any qualified disadvantaged
individual, with respect to whom qualified wages are taken into
account under subdivision (a) is not continued by the qualified
taxpayer for a period of 270 days of employment during the 60-month
period beginning with the day the qualified disadvantaged individual
commences seasonal employment with the qualified taxpayer, the tax
imposed by this part, for the income year that includes the 60th
month following the month in which the qualified disadvantaged
individual commences seasonal employment with the qualified taxpayer,
shall be increased by an amount equal to the credit allowed under
subdivision (a) for that income year and all prior income years
attributable to qualified wages paid or incurred with respect to that
qualified disadvantaged individual.
   (2) (A) Subparagraph (A) of paragraph (1) does not apply to any of
the following:
   (i) A termination of employment of a qualified disadvantaged
individual who voluntarily leaves the employment of the qualified
taxpayer.
   (ii) A termination of employment of a qualified disadvantaged
individual who, before the close of the period referred to in
subparagraph (A) of paragraph (1), becomes disabled to perform the
services of that employment, unless that disability is removed before
the close of that period and the qualified taxpayer fails to offer
reemployment to that individual.
   (iii) A termination of employment of a qualified disadvantaged
individual, if it is determined that the termination was due to the
misconduct (as defined in Sections 1256-30 to 1256-43, inclusive, of
Title 22 of the California Code of Regulations) of that individual.
   (iv) A termination of employment of a qualified disadvantaged
individual due to a substantial reduction in the trade or business
operations of the qualified taxpayer.
   (v) A termination of employment of a qualified disadvantaged
individual, if that individual is replaced by other qualified
disadvantaged individuals so as to create a net increase in both the
number of employees and the hours of employment.
   (B) Subparagraph (B) of paragraph (1) shall not apply to any of
the following:
   (i) A failure to continue the seasonal employment of a qualified
disadvantaged individual who voluntarily fails to return to the
seasonal employment of the qualified taxpayer.
   (ii) A failure to continue the seasonal employment of a qualified
disadvantaged individual who, before the close of the period referred
to in subparagraph (B) of paragraph (1), becomes disabled and unable
to perform the services of that seasonal employment, unless that
disability is removed before the close of that period and the
qualified taxpayer fails to offer seasonal employment to that
qualified disadvantaged individual.
   (iii) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if it is determined that the failure to
continue the seasonal employment was due to the misconduct (as
defined in Sections 1256-30 to 1256-43, inclusive, of Title 22 of the
California Code of Regulations) of that qualified disadvantaged
individual.
   (iv) A failure to continue seasonal employment of a qualified
disadvantaged individual due to a substantial reduction in the
regular seasonal trade or business operations of the qualified
taxpayer.
   (v) A failure to continue the seasonal employment of a qualified
disadvantaged individual, if that qualified disadvantaged individual
is replaced by other qualified disadvantaged individuals so as to
create a net increase in both the number of seasonal employees and
the hours of seasonal employment.
   (C) For purposes of paragraph (1), the employment relationship
between the qualified taxpayer and a qualified disadvantaged
individual shall not                                            be
treated as terminated by either of the following:
   (i) By a transaction to which Section 381(a) of the Internal
Revenue Code applies, if the qualified disadvantaged individual
continues to be employed by the acquiring corporation.
   (ii) By reason of a mere change in the form of conducting the
trade or business of the qualified taxpayer, if the qualified
disadvantaged individual continues to be employed in that trade or
business and the qualified taxpayer retains a substantial interest in
that trade or business.
   (3) Any increase in tax under paragraph (1) shall not be treated
as tax imposed by this part for purposes of determining the amount of
any credit allowable under this part.
   (e) The credit shall be reduced by the credit allowed under
Section 23621.  The credit shall also be reduced by the federal
credit allowed under Section 51 of the Internal Revenue Code.
   In addition, any deduction otherwise allowed under this part for
the wages or salaries paid or incurred by the qualified taxpayer upon
which the credit is based shall be reduced by the amount of the
credit, prior to any reduction required by subdivision (f) or (g).
   (f) In the case where the credit otherwise allowed under this
section exceeds the "tax" for the income year, that portion of the
credit that exceeds the "tax" may be carried over and added to the
credit, if any, in succeeding years, until the credit is exhausted.
The credit shall be applied first to the earliest income years
possible.
   (g) (1) The amount of credit otherwise allowed under this section,
including prior year credit carryovers, that may reduce the "tax"
for the income year shall not exceed the amount of tax that would be
imposed on the qualified taxpayer's business income attributed to a
Manufacturing Enhancement Area determined as if that attributed
income represented all of the net income of the qualified taxpayer
subject to tax under this part.
   (2) Attributable income is that portion of the taxpayer's
California source business income that is apportioned to the
Manufacturing Enhancement Area.  For that purpose, the taxpayer's
business income attributable to sources in this state first shall be
determined in accordance with Chapter 17 (commencing with Section
25101).  That business income shall be further apportioned to the
Manufacturing Enhancement Area in accordance with Article 2
(commencing with Section 25120) of Chapter 17, modified for purposes
of this section in accordance with paragraph (3).
   (3) Income shall be apportioned to a Manufacturing Enhancement
Area by multiplying the total California business income of the
taxpayer by a fraction, the numerator of which is the property factor
plus the payroll factor, and the denominator of which is two.  For
the purposes of this paragraph:
   (A) The property factor is a fraction, the numerator of which is
the average value of the taxpayer's real and tangible personal
property owned or rented and used in the Manufacturing Enhancement
Area during the taxable year, and the denominator of which is the
average value of all the taxpayer's real and tangible personal
property owned or rented and used in this state during the taxable
year.
   (B) The payroll factor is a fraction, the numerator of which is
the total amount paid by the taxpayer in the Manufacturing
Enhancement Area during the taxable year for compensation, and the
denominator of which is the total compensation paid by the taxpayer
in this state during the taxable year.
   (4) The portion of any credit remaining, if any, after application
of this subdivision, shall be carried over to succeeding income
years, as if it were an amount exceeding the "tax" for the income
year, as provided in subdivision (g).
   (h) If the taxpayer is allowed a credit pursuant to this section
for qualified wages paid or incurred, only one credit shall be
allowed to the taxpayer under this part with respect to any wage
consisting in whole or in part of those qualified wages.
